The Markets in Crypto Assets Regulation (MiCA)¹ provides the legal framework for digital asset services within the European Union. This regulation, detailed with its 149 articles and 6 annexes, mandates that entities wishing to provide digital asset services across the EU must secure authorisation in one of the EU Member States. It impacts Malta not only because of the regulation’s direct applicability but also because the jurisdiction is known for its forward-thinking stance in financial technology law due to its early implementation of the Virtual Financial Assets Act, Chapter 590 of the Laws of Malta.

In this fintech insight, rather than going into the detail of obtaining authorisation under MiCA, we will analyse the operational leeway for entities without a MiCA authorisation, with a special focus on reverse solicitation under Article 61 of MiCA. As per Article 149 of MiCA, following the release of MiCA’s final version on the 9^th of June 2023, the regulation became effective 20 days later. Subsequently, on the 30^th of December 2024, 18 months after its publication, MiCA will be applied across all EU Member States, making it the compulsory legal standard.

Reverse solicitation is a long-standing element in EU financial services legislation and is also included in MiFID II² which allows non-EU firms to offer investment services in the EU if initiated solely by the client, without any active marketing by the firm. Reflecting this principle, MiCA permits companies outside the EU to offer digital asset services without MiCA authorisation, contingent on the services being requested exclusively by clients.  For firms opting not to be licensed under MiCA, reverse solicitation emerges as a crucial pathway to offer services in the EU, leading to an implicit de facto marketing ban for third-country entities.

The principle of reverse solicitation is incorporated under Article 61(1) MiCA, which reads as follows:

“Where a client established or situated  in the Union initiates at its own exclusive initiative, the provision of a crypto-asset service or activity by a third-country firm, the requirement for authorisation under Article 59 shall not apply to the provision of that crypto-asset  service or activity by the third-country  firm to that client, including a relationship specifically relating to the provision of that crypto-asset service or activity.”³

The term “own exclusive initiative” implies that a client must choose a service independently, without external influence. This means that service providers, like third-country crypto-asset service providers (CASPs), cannot persuade clients to use their crypto-asset services. This principle aligns with MiFID II, which acknowledges the right of EU individuals to access services. Recital 75 of MiCA supports this notion by stating that individuals in the EU can receive crypto-asset services from third-country firms based on their own initiative. However, if a third-country firm solicits, promotes, or advertises its services, the service is not considered to be provided on the client’s “own exclusive initiative“. In such cases, the firm must be authorised under MiCA. This interpretation of “own exclusive initiative” from Article 42 MiFID II essentially prohibits unauthorised third-country firms from marketing in the EU. The same interpretation applies to MiCA under Article 61(1), barring third-country CASPs from EU marketing activities without MiCA authorisation.

Article 61(1) MiCA provides that non-EU CASPs can offer services to EU clients on a reverse solicitation basis, meaning they do not need EU authorisation if the client initiates the service. However, despite the existence of a small window of opportunity to offer crypto-asset services in the EU through the principle of reverse solicitation, there are several limitations because Article 61 of MiCA essentially imposes an implicit marketing prohibition on those CASPs which lack the necessary authorisation under MiCA.

Article 61(1)(paragraph 2) MiCA is a clear example of this limitation on reverse solicitation as it imposes an implicit de facto marketing ban on unauthorised third-country CASPs. According to the provision, where a third country firm, including an entity acting on its behalf or having close links with such third country firm or any other person acting on behalf of such entity, “solicits clients or prospective clients in the Union, regardless of the means of communication used for solicitation, promotion or advertising,” the service cannot be deemed to be provided at the client’s own exclusive initiative.  Furthermore, Recital 75 of MiCA says that “where a third-country firm solicits clients or prospective clients in the Union or promotes or advertises crypto-asset services or activities in the Union, its services should not be deemed to be crypto-asset services provided on the own initiative of the client. In such a case, the third-country firm should be authorised as a crypto-asset service provider”.⁴

A further limitation on reverse solicitation emanates from Article 61(1)(paragraph 3) of MiCA which prohibits the use of “any contractual clause or disclaimer purporting to state otherwise, including any clause or disclaimer that the provision of services by a third-country firm is deemed to be a service provided on the client’s own exclusive initiative.“⁵ This addition in Article 61 MiCA stems from the experience with the application of the principle of reverse solicitation under MiFID II. ESMA highlights in its Q&As relating to MIFID that the assessment of the client’s independent initiative should be conducted irrespective of any contractual clause or disclaimer that may claim, for instance, that the third country firm will be considered to be responsive to the client’s exclusive initiative.  ESMA further elaborated this point in its 2021 Public Statement⁶, highlighting that some questionable practices had emerged, such as including general terms in the Terms of Business or online pop-up “I agree” boxes where the client stated that transactions were executed on their own initiative. According to ESMA, these practices contradicted the purpose and intention of the reverse solicitation principle in MiFID II. Therefore, the inclusion of this prohibition directly in Article 61 MiCA adds weight to the restriction, leaving no room for claims of ignorance for third-country CASPs applying the reverse solicitation principle under MiCA.

Another issue raised by Article 61 MiCA in relation to reverse solicitation is on the retrospective application of the marketing ban and the timing of its effectiveness. Specifically, it raises questions about whether past marketing activities by third-country CASPs before MiCA’s entry into force will affect their ability to use the reverse solicitation principle in the future. The timing issue pertains to when the implicit marketing ban takes effect and when third-country CASPs must seek MiCA authorisation. The key question is whether past marketing conduct by third-country CASPs before MiCA’s enactment would impact their ability to use the reverse solicitation principle in the future. MiCA’s non-retroactivity principle suggests that past activities shouldn’t be considered. However, complications could arise when considering national regimes, which some EU National Competent Authorities have enforced rigorously.

Separately, it is also noteworthy that the principle of reverse solicitation applies in relation to both retail and professional clients. Under MiFID II, this principle applies to both types of clients, allowing third-country firms subject to licensing requirements to provide services on a reverse solicitation basis to both. MiCA, however, does not distinguish between retail and professional clients in the same way as MiFID II. It simply states that a “client” must initiate the crypto-asset service exclusively for the reverse solicitation principle to apply to third-country CASPs. While MiCA defines “retail holder” as any natural person outside of trade, business, craft, or profession, the regulation’s marketing ban does not differentiate between retail and professional clients. Despite the emphasis on protecting retail holders, the marketing restriction by third-country CASPs applies uniformly to all clients in the EU irrispective of whether they are individual retail holders or clients engaging in crypto-asset services professionally.

Article 61 MiCA says that “ESMA shall by 30 December 2024 issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify the situations in which a third-country firm is deemed to solicit clients established or situated in the Union.”⁷ A current⁸ ESMA consultation on MiCA shows that it is expected that ESMA will interpret Article 61 MiCA restrictively, particularly regarding the extent of the principle’s applicability and the categorisation of activities deemed as prohibited marketing by unauthorised CASPs.